Change your VAT scheme

There may be a time when you need to change VAT schemes, for example, because you’ve reached a turnover threshold or because a different scheme would be more beneficial to your business. The following VAT schemes are available in Accounting:

  • Not Registered – VAT options aren’t available when entering transactions and no VAT calculates.

  • Invoice Basis – VAT calculates on invoices and credits issued and received.

  • Cash Basis – VAT calculates on payments and receipts.

For more information about how VAT calculates on these schemes, refer to our help guide.

We recommend changing VAT schemes at the start of a new accounting period after you’ve produced your final VAT Return for the previous scheme. To ensure VAT is accounted for correctly, you shouldn’t enter any transactions on the new scheme until you’ve ran the return and changed your scheme.

Preparing to change your VAT scheme

Before you change your VAT scheme you must:

  • Ensure you’ve entered all transactions up to the end of the final period for which you’re using the current VAT scheme.
  • Allocate any outstanding payments on account. If you can’t allocate the payment on account, provided it hasn’t been bank reconciled, you can delete the payment then enter it again after you’ve changed schemes. Alternatively, if the payment on account has been bank reconciled, you can refund the payment on account, change your scheme and then enter it again.

If you use the Cash Basis VAT Scheme when you issue the refund, both the payment on account and the refund are included on the final VAT Return. To ensure the VAT Return is correct, you must manually adjust it to remove the values of the refund.

  • Produce your final VAT Return for the current VAT scheme. If you have a draft VAT Return, you can’t change VAT schemes, you must complete the draft return.

If you need to allocate payments on account to outstanding invoices, you must run the VAT Return up to the allocation date. You can check the allocation date within the Activity tab of the relevant customer or supplier record.

Future dated transactions

If you’ve any future dated transactions that haven’t been VAT reconciled, you can’t change your VAT scheme. You should wait until after these transactions have been included on a VAT Return then change your VAT scheme from the next period. Alternatively, you can delete or void the transactions, change your VAT scheme and then enter the transactions again under the new scheme.

If you’ve any future bank reconciled transactions, you can’t delete these. You must include any appropriate bank transactions on a VAT Return then wait until after the date of the last transaction or VAT Return, whichever is later, before changing your VAT scheme.

Not registered for VAT

If you’re changing from being not registered for VAT to another scheme, any transactions you entered prior to changing the VAT scheme aren’t included on your VAT Return. If they should be included, for example, because you didn’t choose your scheme before entering them, you should void or delete the transactions. You can then change the VAT scheme and enter them again choosing the correct VAT rate. When you run your first VAT Return, the relevant transactions are included.

To change your VAT scheme

Before following these steps, ensure you’ve completed the Preparing to change your VAT scheme section.

  1. Go to the Settings, then Business Settings tab, then in the Financial Settings section click Accounting Dates & VAT.
  2. Under VAT Details, enter the following information:
VAT Scheme Choose your new VAT scheme.
Submission Frequency You must submit your return to Revenue bi-monthly.
VAT Number Enter your VAT number.
  1. Click Save.

You’ve successfully changed your VAT scheme. The next time you produce a VAT Return, it includes the relevant transactions for the new scheme.

If you’re changing to the Cash Basis VAT Scheme, and you have outstanding invoices or credit notes entered on the previous scheme, when you record these as paid or refunded, no VAT calculates as this has already been accounted for.

Messages received when changing schemes

You must submit a VAT Return before changing tax scheme

You haven’t yet submitted your final VAT Return for the current VAT scheme. Click Cancel then submit your final VAT Return before trying to change the VAT scheme again.

Before changing tax scheme you must void any future dated transactions

You’ve VATable transactions dated in the future. If these transactions haven’t yet been VAT reconciled, you can delete or void them then change VAT scheme and enter them again. If they’ve been included on a VAT Return, you must wait until after the date of the last transaction before changing schemes.

To help identify future dated transactions, you can run the Nominal Activity Report. When running this report, to ensure it includes all transactions, enter a To date in the future. For example, one year from now.

You can’t change scheme until you’ve allocated outstanding payments on account and then ran a VAT return to pick up these allocations

You’ve outstanding payments on account which you must allocate before you can change schemes. When you allocate payments on account to an invoice, it creates either a customer allocation or supplier allocation transaction.

Although the allocation doesn’t add any values to your VAT Return, it must still be reconciled for VAT. To do this you need to run a final VAT Return up to the date of the allocation. You can check the allocation date within the Activity tab of the relevant customer or supplier record.

If you can’t allocate the outstanding payment on account:

  • Not registered, Standard VAT or Flat Rate Invoice Based – Provided it hasn’t been bank reconciled, delete the payment on account then enter it again after you’ve changed schemes. Alternatively, if the payment on account has been bank reconciled, you can refund the payment on account, change your scheme, then enter it again.

  • VAT or Flat Rate Invoice Based – If you’ve VAT reconciled the payment on account, you can’t delete it. You should wait until you can allocate the payment to an invoice. If you’re unable to wait, you can still refund the payment on account. However, you must then produce a final VAT Return for this and manually adjust the return to remove the values of the refund.